QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2018

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM __________ TO ________

COMMISSION FILE NUMBER 001-34295

SIRIUS XM HOLDINGS INC.

(Exact name of registrant as specified in its charter)

Delaware

38-3916511

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer Identification No.)

1290 Avenue of the Americas, 11th Floor

New York, New York

10104

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (212) 584-5100

Former name, former address and former fiscal year, if changed since last report: Not Applicable

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes
þ
No
o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
þ
No
o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

Large accelerated filer
þ

Accelerated filer
o

Non-accelerated filer
o

(Do not check if a smaller reporting company)

Smaller reporting company
o

Emerging growth company
o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
o
No
þ

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

146,835

150,223

Non-cash interest expense, net of amortization of premium

4,713

4,231

Provision for doubtful accounts

23,944

27,377

Amortization of deferred income related to equity method investment

(1,388

)

(1,388

)

Loss on unconsolidated entity investments, net

64

2,183

Gain on fair value instrument

(117,449

)

—

Dividend received from unconsolidated entity investment

1,366

3,606

Share-based payment expense

70,448

59,697

Deferred income taxes

134,044

220,415

Changes in operating assets and liabilities:

Receivables

(29,364

)

(38,063

)

Inventory

1,232

2,492

Related party, net

(1,722

)

(5,756

)

Prepaid expenses and other current assets

(177

)

(6,617

)

Other long-term assets

8,356

5,937

Accounts payable and accrued expenses

87,857

(69,078

)

Accrued interest

(9,399

)

(7,042

)

Deferred revenue

85,100

30,779

Other long-term liabilities

7,863

4,358

Net cash provided by operating activities

994,116

792,536

Cash flows from investing activities:

Additions to property and equipment

(174,273

)

(119,517

)

Purchases of other investments

(7,138

)

(7,355

)

Acquisition of business, net of cash acquired

—

(107,056

)

Investments in related parties and other equity investees

(6,138

)

(302,526

)

Repayment from (loan to) related party

3,242

(130,794

)

Net cash used in investing activities

(184,307

)

(667,248

)

Cash flows from financing activities:

Taxes paid in lieu of shares issued for stock-based compensation

(71,501

)

(22,595

)

Revolving credit facility, net of deferred financing costs

(302,611

)

610,000

Principal payments of long-term borrowings

(7,717

)

(6,000

)

Common stock repurchased and retired

(334,215

)

(783,824

)

Dividends paid

(98,684

)

(93,638

)

Net cash used in financing activities

(814,728

)

(296,057

)

Net decrease in cash, cash equivalents and restricted cash

(4,919

)

(170,769

)

Cash, cash equivalents and restricted cash at beginning of period

79,374

223,828

Cash, cash equivalents and restricted cash at end of period
(1)

$

74,455

$

53,059

(1)

The following table reconciles cash, cash equivalents and restricted cash per the statement of cash flows to the balance sheet. The restricted cash balances are primarily due to letters of credit which have been issued to the landlords of leased office space. The terms of the letters of credit primarily extend beyond one year.

June 30, 2018

December 31, 2017

June 30, 2017

December 31, 2016

Cash and cash equivalents

$

63,516

$

69,022

$

42,738

$

213,939

Restricted cash included in Prepaid expenses and other current assets

150

244

432

—

Restricted cash included in Other long-term assets

10,789

10,108

9,889

9,889

Total cash, cash equivalents and restricted cash at end of period

$

74,455

$

79,374

$

53,059

$

223,828

See accompanying notes to the unaudited consolidated financial statements.

This Quarterly Report on Form 10-Q presents information for Sirius XM Holdings Inc. (“Holdings”). The terms “Holdings,” “we,” “us,” “our,” and “our company” as used herein, and unless otherwise stated or indicated by context, refer to Sirius XM Holdings Inc. and its subsidiaries, and “Sirius XM” refers to our wholly-owned subsidiary Sirius XM Radio Inc. Holdings has no operations independent of its wholly-owned subsidiary, Sirius XM.

Business

We transmit music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis through our
two
proprietary satellite radio systems. Subscribers can also receive music and other channels, plus features such as SiriusXM On Demand, over our Internet radio service, including through applications for mobile devices, home devices and other consumer electronic equipment. We also provide connected vehicle services. Our connected vehicle services are designed to enhance the safety, security and driving experience for vehicle operators while providing marketing and operational benefits to automakers and their dealers.

We have agreements with every major automaker (“OEMs”) to offer satellite radio in their vehicles, through which we acquire the majority of our subscribers. We also acquire subscribers through marketing to owners and lessees of previously owned vehicles that include factory-installed satellite radios that are not currently subscribing to our services. Our satellite radios are primarily distributed through automakers, retailers, and our website. Satellite radio services are also offered to customers of certain rental car companies.

Our primary source of revenue is subscription fees, with most of our customers subscribing to annual, semi-annual, quarterly or monthly plans. We offer discounts for prepaid, longer-term subscription plans, as well as a multiple subscription discount. We also derive revenue from activation and other fees, the sale of advertising on select non-music channels, the direct sale of satellite radios and accessories, and other ancillary services, such as our weather, traffic and data services.

In many cases, a subscription to our radio services is included with the purchase of new or previously owned vehicles. The length of these subscriptions varies but is typically
three
to
twelve months
. We receive payments for these subscriptions from certain automakers. We also reimburse various automakers for certain costs associated with satellite radios installed in new vehicles and pay revenue share to various automakers.

As of
June 30, 2018
, Liberty Media Corporation (“Liberty Media”) beneficially owned, directly and indirectly, approximately
70%
of the outstanding shares of our common stock. As a result, we are a “controlled company” for the purposes of the NASDAQ corporate governance requirements.

Basis of Presentation

The accompanying unaudited consolidated financial statements of Holdings and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Certain numbers in our prior period consolidated financial statements and footnotes have been reclassified or consolidated to conform to our current period presentation.

All significant intercompany transactions have been eliminated in consolidation. In the opinion of our management, all normal recurring adjustments necessary for a fair presentation of our unaudited consolidated financial statements as of
June 30, 2018
and for the
three and six months
ended
June 30, 2018
and
2017
have been made.

Interim results are not necessarily indicative of the results that may be expected for a full year. This Quarterly Report on Form 10-Q should be read together with our Annual Report on Form 10-K for the year ended
December 31, 2017
, which was filed with the SEC on January 31, 2018.

Public companies are required to disclose certain information about their reportable operating segments. Operating segments are defined as significant components of an enterprise for which separate financial information is available and is evaluated on a regular basis by the chief operating decision maker in deciding how to allocate resources to an individual segment and in assessing performance of the segment. We have determined that we have
one
reportable segment as our chief

We have evaluated events subsequent to the balance sheet date and prior to the filing of this Quarterly Report on Form 10-Q for the
three and six months
ended
June 30, 2018
and have determined that no events have occurred that would require adjustment to our unaudited consolidated financial statements. For a discussion of subsequent events that do not require adjustment to our unaudited consolidated financial statements refer to Note 16.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Estimates, by their nature, are based on judgment and available information. Actual results could differ materially from those estimates. Significant estimates inherent in the preparation of the accompanying unaudited consolidated financial statements include asset impairment, depreciable lives of our satellites, share-based payment expense, and income taxes.

(2)

Summary of Significant Accounting Policies

Fair Value Measurements

For assets and liabilities required to be reported at fair value, GAAP provides a hierarchy that prioritizes inputs to valuation techniques used to measure fair value into three broad levels. Level 1 inputs are based on unadjusted quoted prices in active markets for identical instruments. Level 2 inputs are inputs, other than quoted market prices included within Level 1, that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. As of
June 30, 2018
and
December 31, 2017
, the carrying amounts of cash and cash equivalents, receivables, and accounts payable approximated fair value due to the short-term nature of these instruments.

Our assets and liabilities measured at fair value were as follows:

June 30, 2018

December 31, 2017

Level 1

Level 2

Level 3

Total Fair
Value

Level 1

Level 2

Level 3

Total Fair
Value

Assets:

Pandora Media, Inc. (“Pandora”) - investment
(a)

—

$

597,921

—

$

597,921

—

$

480,472

—

$

480,472

Liabilities:

Debt
(b)

—

$

6,342,699

—

$

6,342,699

—

$

6,987,473

—

$

6,987,473

(a)

During the year ended December 31, 2017, Sirius XM completed a
$480,000
investment in Pandora. We have elected the fair value option to account for this investment. Refer to Note 10 for information on this transaction.

(b)

The fair value for non-publicly traded debt is based upon estimates from a market maker and brokerage firm. Refer to Note 11 for information related to the carrying value of our debt as of
June 30, 2018
and
December 31, 2017
.

Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income of
$4,594
was primarily comprised of the cumulative foreign currency translation adjustments related to our investment in and loan to Sirius XM Canada Holdings Inc. (“Sirius XM Canada”) (refer to Note 10 for additional information). During the
three and six months
ended
June 30, 2018
, we recorded a foreign currency translation adjustment loss of
$8,242
and
$17,826
net of tax of
$2,663
and
$5,735
, respectively. In addition, we reclassified stranded tax effects of
$4,013
related to the adoption of Accounting Standards Update ("ASU") 2018-02,
Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income,
during the
six months
ended
June 30, 2018
.

In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU 2018-07,
Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
, which simplifies the accounting for share-based payments made to nonemployees so the accounting for such payments is substantially the same as those made to employees. Under this ASU, share based awards to nonemployees will be measured at fair value on the grant date of the awards, entities will need to assess the probability of satisfying performance conditions if any are present, and awards will continue to be classified according to Accounting Standards Codification (“ASC”) 718 upon vesting which eliminates the need to reassess classification upon vesting, consistent with awards granted to employees. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. We are in the process of evaluating the impact of adoption of this ASU on our consolidated financial statements.

In February 2016, FASB issued ASU 2016-02,
Leases (Topic 842)
. This ASU requires a company to recognize lease assets and liabilities arising from operating leases in the statement of financial position. This ASU does not significantly change the previous lease guidance for how a lessee should recognize the recognition, measurement, and presentation of expenses and cash flows arising from a lease. Additionally, the criteria for classifying a finance lease versus an operating lease are substantially the same as the previous guidance. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. The FASB recently issued an exposure draft amending certain aspects of the new leasing standard. The proposed amendment allows adoption of the standard as of the effective date without restating prior periods. We plan to adopt this ASU on January 1, 2019. We expect the adoption of ASU 2016-02 will result in the recognition of right-of-use assets and lease liabilities on our consolidated balance sheets for operating leases.

Recently Adopted Accounting Policies

ASU 2014-09, Revenue - Revenue from Contracts with Customers
. In May 2014, the FASB issued ASU 2014-09 which requires entities to recognize revenues when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. We adopted ASU 2014-09, and all related amendments, which established ASC Topic 606 (the "new revenue standard"), effective as of January 1, 2018. We adopted the new revenue standard using the modified retrospective method by recognizing the cumulative effect of initially applying the new revenue standard to all non-completed contracts as of January 1, 2018 as an adjustment to opening Accumulated deficit in the period of adoption. Results for reporting periods beginning after January 1, 2018 are presented under the new revenue standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 605.

The new revenue standard primarily impacts how we account for revenue share payments and also has other immaterial impacts.

Revenue Share - Paid Trials

We previously recorded revenue share related to paid trials as Revenue share and royalties expense. Under the new revenue standard, we have recorded these revenue share payments as a reduction to revenue as the payments do not transfer a distinct good or service to us. Prior to the adoption, we recognized revenue share related to paid trial subscriptions as the Current portion of deferred revenue. Under the new revenue standard, we reclassified the revenue share related to paid trial subscriptions existing as of the date of adoption from Current portion of deferred revenue to Accounts payable and accrued expenses. For new paid trial subscriptions, the net amount of the paid trial subscription will be recorded as deferred revenue and the portion of revenue share will be recorded to Accounts payable and accrued expenses.

Other Impacts

Other impacts of the new revenue standard include:

•

Activation fees were previously recognized over the expected subscriber life using the straight-line method. Under the new revenue standard, the activation fees have been recognized over a
one month
period from activation as the

activation fees are non-refundable and they do not convey a material right. As of January 1, 2018, we reduced deferred revenue related to activation fees of
$8,260
, net of tax, to Accumulated deficit.

•

Loyalty payments to OEMs were previously expensed when incurred as Subscriber acquisition costs. Under the new revenue standard, these costs have been capitalized in Prepaid expenses and other current assets as costs to obtain a contract and these costs will be amortized to Subscriber acquisition costs over an average self-pay subscriber life of that OEM. As of January 1, 2018, we capitalized previously expensed loyalty payments of
$10,156
, net of tax, to Prepaid expenses and other current assets by reducing Accumulated deficit.

These changes do not have a material impact to our financial statements.

ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.
In February 2018, the FASB issued ASU 2018-02 to amend its standard on comprehensive income to provide an option for an entity to reclassify the stranded tax effects of the Tax Cuts and Jobs Act (the “Tax Act”) that was passed in December 2017 from accumulated other comprehensive income (“AOCI”) directly to retained earnings. The stranded tax effects result from the remeasurement of deferred tax assets and liabilities which were originally recorded in comprehensive income but whose remeasurement is reflected in the income statement. The guidance is effective for interim and fiscal years beginning after December 15, 2018, with early adoption permitted. We elected to adopt ASU 2018-02 effective January 1, 2018 and reclassified the stranded tax effects due to the Tax Act of
$4,013
related to the currency translation adjustment from our investment balance and note receivable with Sirius XM Canada from AOCI to Accumulated deficit.

The cumulative effect of the changes made to our consolidated balance sheet as of January 1, 2018 for the adoption of ASU 2014-09 and ASU 2018-02 are included in the table below.

Balance at
December 31, 2017

Adjustments Due to ASU 2014-09

Adjustments Due to ASU 2018-02

Balance at

January 1, 2018

Balance Sheet

Assets

Prepaid expenses and other current assets

$

129,669

$

8,262

$

—

$

137,931

Other long-term assets

118,671

2,576

—

121,247

Deferred tax assets

505,528

(5,915

)

—

499,613

Liabilities:

Accounts payable and accrued expenses

794,341

32,399

—

826,740

Current portion of deferred revenue

1,881,825

(41,902

)

—

1,839,923

Deferred revenue

174,579

(3,990

)

—

170,589

Equity:

Accumulated deficit

(3,243,473

)

18,416

(4,013

)

(3,229,070

)

AOCI, net of tax

18,407

—

4,013

22,420

The following table illustrates the impact of adopting ASU 2014-09 on our unaudited consolidated statement of comprehensive income. The adoption of ASU 2018-02 did not impact our unaudited consolidated statement of comprehensive income.

The adoption of the new revenue standard did not have a material impact on our unaudited consolidated balance sheet as of
June 30, 2018
.

ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash.
In November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230): Restricted Cash
. This ASU updates the guidance related to the statement of cash flows and requires that the statement include restricted cash with cash and cash equivalents when reconciling beginning and ending cash. The guidance was effective for fiscal years beginning after December 15, 2017, including interim periods within that reporting period. We adopted this ASU effective January 1, 2018. As a result of the adoption, we have added restricted cash to the reconciliation of beginning and ending cash and cash equivalents and included a reconciliation of total cash, cash equivalents and restricted cash to the balance sheet for each period presented in the unaudited consolidated statements of cash flows.

(3)

Revenues

Adoption of the new revenue standard

We adopted the new revenue standard using the modified retrospective method by recognizing the cumulative effect of initially applying the new revenue standard to all non-completed contracts as of January 1, 2018 as an adjustment to opening Accumulated deficit in the period of adoption.
Results for reporting periods beginning after January 1, 2018 are presented under the new revenue standard, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under ASC Topic 605.

Disaggregation of Revenue

We disaggregate our revenues as shown in the unaudited consolidated statements of comprehensive income.

Nature of goods and services

The following is a description of principal activities from which we generate our revenue, including from subscribers, advertising, and sales of equipment.

Subscription Revenue

Subscription revenue consists primarily of subscription fees and other ancillary subscription based revenues. Revenue is recognized on a straight line basis when the performance obligations to provide each service for the period are satisfied, which is over time as our subscription services are continuously transmitted and can be consumed by customers at any time. Consumers purchasing or leasing a vehicle with a factory-installed satellite radio typically receive between a three and twelve month subscription to our service. In certain cases, the subscription fees for these consumers are prepaid by the applicable

automaker. Prepaid subscription fees received from certain automakers or directly from consumers are recorded as deferred revenue and amortized to revenue ratably over the service period which commences upon sale and activation. Activation fees are recognized over one month as the activation fees are non-refundable and do not provide for a material right to the customer. There is no revenue recognized for unpaid trial subscriptions. In some cases we pay a loyalty fee to the OEM when we receive a certain amount of payments from self-pay customers acquired from that OEM. These fees are considered incremental costs to obtain a contract and are, therefore, recognized as an asset and amortized to Subscriber acquisition costs over an average subscriber life of that OEM. Revenue share and loyalty fees paid to the OEM offering a paid trial are accounted for as a reduction of revenue as the payment does not provide a distinct good or service.

Advertising Revenue

We recognize revenue from the sale of advertising as performance obligations are satisfied upon airing of the advertising; therefore, revenue is recognized at a point in time when each advertising spot is transmitted. Agency fees are calculated based on a stated percentage applied to gross billing revenue for our advertising inventory and are reported as a reduction of advertising revenue. Additionally, we pay certain third parties a percentage of advertising revenue. Advertising revenue is recorded gross of such revenue share payments as we control the advertising service, including the ability to establish pricing, and we are primarily responsible for providing the service. Advertising revenue share payments are recorded to Revenue share and royalties during the period in which the advertising is transmitted.

Equipment Revenue

Equipment revenue and royalties from the sale of satellite radios, components and accessories are recognized when the performance obligation is satisfied and control is transferred, which is generally upon shipment. Revenue is recognized net of discounts and rebates.

Music Royalty Fee and Other Revenue

Music Royalty Fee and Other Revenue primarily consists of U.S. music royalty fees ("MRF"). The related costs we incur for the right to broadcast music and other programming are recorded as Revenue share and royalties expense. Fees received from subscribers for the MRF are recorded as deferred revenue and amortized to revenue ratably over the service period as the royalties relate to the subscription services which are continuously delivered to our customers.

Deferred Revenue

Customers generally pay for the services in advance of the performance obligation and therefore these prepayments are recorded as deferred revenue. The deferred revenue is recognized as revenue in our unaudited consolidated statement of comprehensive income as the services are provided. Changes in the liability balance during the period ended June 30, 2018 was not materially impacted by other factors.

Transaction Price Allocated to the Remaining Performance Obligations

As the majority of our contracts are one year or less, we have utilized the optional exemption under ASC 606-10-50-14 and will not disclose information about the remaining performance obligations for contracts which have original expected durations of one year or less. As of June 30, 2018, less than ten percent of our total deferred revenue balance related to contracts that extended beyond one year. These contracts primarily include prepaid data trials which are typically provided for three to five years as well as for self-pay customers who prepay for their audio subscriptions for up to three years in advance. These amounts will be recognized on a straight-line basis as our services are provided.

(4)

Earnings per Share

Basic net income per common share is calculated by dividing the income available to common stockholders by the weighted average common shares outstanding during each reporting period. Diluted net income per common share adjusts the weighted average number of common shares outstanding for the potential dilution that could occur if common stock equivalents (stock options and restricted stock units) were exercised or converted into common stock, calculated using the treasury stock method. We had
no
participating securities during the
three and six months
ended
June 30, 2018
and
2017
.

Common stock equivalents of
24,191
and
35,468
for the
three months
ended
June 30, 2018
and
2017
, respectively, and
45,032
and
35,447
for the
six months
ended
June 30, 2018
and
2017
, respectively, were excluded from the calculation of diluted net income per common share as the effect would have been anti-dilutive.

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2018

2017

2018

2017

Numerator:

Net income available to common stockholders for basic and diluted net income per common share

$

292,352

$

202,109

$

581,793

$

409,182

Denominator:

Weighted average common shares outstanding for basic net income per common share

4,481,930

4,652,426

4,486,620

4,681,223

Weighted average impact of dilutive equity instruments

107,165

83,166

102,366

78,518

Weighted average shares for diluted net income per common share

4,589,095

4,735,592

4,588,986

4,759,741

Net income per common share:

Basic

$

0.07

$

0.04

$

0.13

$

0.09

Diluted

$

0.06

$

0.04

$

0.13

$

0.09

(5)

Receivables, net

Receivables, net, includes customer accounts receivable, receivables from distributors and other receivables.

Customer accounts receivable, net, includes receivables from our subscribers and other customers, including advertising, and is stated at amounts due, net of an allowance for doubtful accounts. Our allowance for doubtful accounts is based upon our assessment of various factors. We consider historical experience, the age of the receivable balances, current economic conditions and other factors that may affect the counterparty’s ability to pay. Bad debt expense is included in Customer service and billing expense in our unaudited consolidated statements of comprehensive income.

Receivables from distributors primarily include billed and unbilled amounts due from OEMs for services included in the sale or lease price of vehicles, as well as billed amounts due from wholesale distributors of our satellite radios. Other receivables primarily include amounts due from manufacturers of our radios, modules and chipsets where we are entitled to subsidies and royalties based on the number of units produced. We have not established an allowance for doubtful accounts for our receivables from distributors or other receivables as we have historically not experienced any significant collection issues with OEMs or other third parties.

Receivables, net, consists of the following:

June 30, 2018

December 31, 2017

Gross customer accounts receivable

$

105,764

$

100,342

Allowance for doubtful accounts

(8,302

)

(9,500

)

Customer accounts receivable, net

$

97,462

$

90,842

Receivables from distributors

121,407

121,410

Other receivables

28,279

29,475

Total receivables, net

$

247,148

$

241,727

(6)

Inventory, net

Inventory consists of finished goods, refurbished goods, chipsets and other raw material components used in manufacturing radios and connected vehicle devices. Inventory is stated at the lower of cost or market. We record an estimated allowance for inventory that is considered slow moving or obsolete or whose carrying value is in excess of net realizable value. The provision related to products purchased for resale in our direct to consumer distribution channel and components

held for resale by us is reported as a component of Cost of equipment in our unaudited consolidated statements of comprehensive income. The provision related to inventory consumed in our OEM channel is reported as a component of Subscriber acquisition costs in our unaudited consolidated statements of comprehensive income.

Inventory, net, consists of the following:

June 30, 2018

December 31, 2017

Raw materials

$

5,615

$

6,489

Finished goods

18,915

21,225

Allowance for obsolescence

(5,563

)

(7,515

)

Total inventory, net

$

18,967

$

20,199

(7)

Goodwill

Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired in business combinations. Our annual impairment assessment of our single reporting unit is performed as of the fourth quarter of each year, and an assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. ASC 350,
Intangibles - Goodwill and Other
, states that an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. ASC 350 also states that a reporting unit with a zero or negative carrying amount is not required to perform a qualitative assessment. The carrying amount recorded for our
one
reporting unit and goodwill was
$(1,370,568)
and
$2,286,582
, respectively, as of
June 30, 2018
.

As of
June 30, 2018
, there were no indicators of impairment, and
no
impairment losses were recorded for goodwill during the
three and six months
ended
June 30, 2018
and
2017
. As of
June 30, 2018
, the cumulative balance of goodwill impairments recorded since the July 2008 merger (the “Merger”) between our wholly owned subsidiary, Vernon Merger Corporation, and XM Satellite Radio Holdings Inc. (“XM”), was
$4,766,190
, which was recognized during the year ended December 31, 2008.

(8)

Intangible Assets

Our intangible assets include the following:

June 30, 2018

December 31, 2017

Weighted
Average
Useful Lives

Gross
Carrying
Value

Accumulated Amortization

Net Carrying
Value

Gross
Carrying
Value

Accumulated Amortization

Net Carrying
Value

Indefinite life intangible assets:

FCC licenses

Indefinite

$

2,083,654

$

—

$

2,083,654

$

2,083,654

$

—

$

2,083,654

Trademarks

Indefinite

250,800

—

250,800

250,800

—

250,800

Definite life intangible assets:

Subscriber relationships

9 years

—

—

—

380,000

(380,000

)

—

OEM relationships

15 years

220,000

(68,444

)

151,556

220,000

(61,111

)

158,889

Licensing agreements

12 years

45,289

(36,193

)

9,096

45,289

(34,350

)

10,939

Software and technology

7 years

33,872

(17,857

)

16,015

43,915

(25,351

)

18,564

Total intangible assets

$

2,633,615

$

(122,494

)

$

2,511,121

$

3,023,658

$

(500,812

)

$

2,522,846

Indefinite Life Intangible Assets

We have identified our FCC licenses and the XM and Automatic Labs Inc. trademarks as indefinite life intangible assets after considering the expected use of the assets, the regulatory and economic environment within which they are used and the effects of obsolescence on their use.

We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services. The following table outlines the years in which each of our satellite licenses expires:

FCC satellite licenses

Expiration year

SIRIUS FM-5

2025

SIRIUS FM-6

2022

XM-3

2021

XM-4

2022

XM-5

2018

Prior to expiration, we are required to apply for a renewal of our FCC licenses. The renewal and extension of our licenses is reasonably certain at minimal cost, which is expensed as incurred. Each of the FCC licenses authorizes us to use the radio spectrum, which is a renewable, reusable resource that does not deplete or exhaust over time.

Our annual impairment assessment of our identifiable indefinite life intangible assets is performed as of the fourth quarter of each year. An assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of the asset below its carrying value. If the carrying value of the intangible assets exceeds its fair value, an impairment loss is recognized. As of
June 30, 2018
, there were no indicators of impairment, and
no
impairment loss was recognized for intangible assets with indefinite lives during the
three and six months
ended
June 30, 2018
and
2017
.

Definite Life Intangible Assets

Amortization expense for all definite life intangible assets was
$5,863
and
$12,098
for the
three months
ended
June 30, 2018
and
2017
, respectively, and
$11,725
and
$23,626
for the
six months
ended
June 30, 2018
and
2017
, respectively. We retired definite lived intangible assets of
$390,043
during the
six months
ended
June 30, 2018
primarily related to fully amortized subscriber relationships. There were
no
retirements of definite lived intangible assets during the
six months
ended
June 30, 2017
. The expected amortization expense for the remaining period in
2018
, each of the fiscal years
2019
through
2022
and for periods thereafter is as follows:

Depreciation and amortization expense on property and equipment was
$68,760
and
$61,421
for the
three months
ended
June 30, 2018
and
2017
, respectively, and
$135,110
and
$126,597
for the
six months
ended
June 30, 2018
and
2017
, respectively. We retired property and equipment of
$14,760
during the
six months
ended
June 30, 2017
. There were
no
retirements of property and equipment during the
six months
ended
June 30, 2018
.

We capitalize a portion of the interest on funds borrowed to finance the construction and launch of our satellites. Capitalized interest is recorded as part of the asset’s cost and depreciated over the satellite’s useful life. Capitalized interest costs were
$2,901
and
$1,005
for the
three months
ended
June 30, 2018
and
2017
, respectively, and
$5,155
and
$1,723
for the
six months
ended
June 30, 2018
and
2017
, respectively, which related to the construction of our SXM-7 and SXM-8 satellites.

Satellites

As of
June 30, 2018
, we owned a fleet of
five
satellites. The chart below provides certain information on our satellites as of
June 30, 2018
:

In the normal course of business, we enter into transactions with related parties such as Liberty Media, Sirius XM Canada and Pandora.

Liberty Media

As of
June 30, 2018
, Liberty Media beneficially owned, directly and indirectly, approximately
70%
of the outstanding shares of our common stock. Liberty Media has
two
executives and
one
of its directors on our board of directors. Gregory B. Maffei, the President and Chief Executive Officer of Liberty Media, is the Chairman of our board of directors.

Sirius XM Canada

On May 25, 2017, Sirius XM completed a recapitalization of Sirius XM Canada (the “Transaction”), which is now a privately held corporation.

Following the Transaction, Sirius XM holds a
70%
equity interest and
33%
voting interest in Sirius XM Canada, with the remainder of the voting power and equity interests held by
two
of Sirius XM Canada’s previous shareholders. The total consideration from Sirius XM to Sirius XM Canada, excluding transaction costs, during the
year
ended December 31, 2017 was
$308,526
, which included
$129,676
in cash and we issued
35,000
shares of our common stock with an aggregate value of
$178,850
to the holders of the shares of Sirius XM Canada acquired in the Transaction. Sirius XM received common stock, non-voting common stock and preferred stock of Sirius XM Canada. We own
590,950
shares of preferred stock of Sirius XM Canada, which has a liquidation preference of
one
Canadian dollar per share.

In connection with the Transaction, Sirius XM also made a contribution in the form of a loan to Sirius XM Canada in the aggregate amount of
$130,794
. The loan is denominated in Canadian dollars and is considered a long-term investment with any unrealized gains or losses reported within Accumulated other comprehensive (loss) income. The loan has a term of
fifteen years
, bears interest at a rate of
7.62%
per annum and includes customary covenants and events of default, including an event of default relating to Sirius XM Canada’s failure to maintain specified leverage ratios. The terms of the loan require Sirius XM Canada to prepay a portion of the outstanding principal amount of the loan within
sixty days
of the end of each fiscal year in an amount equal to any cash on hand in excess of
C$10,000
at the last day of the financial year if all target dividends have been paid in full. During the
six months
ended
June 30, 2018
, Sirius XM Canada repaid
$3,242
of the principal amount of the loan.

In connection with the Transaction, Sirius XM also entered into a Services Agreement and an Advisory Services Agreement with Sirius XM Canada. Each agreement has a
thirty
year term. Pursuant to the Services Agreement, Sirius XM Canada pays Sirius XM
25%
of its gross revenues on a monthly basis through December 31, 2021 and
30%
of its gross revenues on a monthly basis thereafter. Pursuant to the Advisory Services Agreement, Sirius XM Canada pays Sirius XM
5%
of its gross revenues on a monthly basis. These agreements superseded and replaced the former agreements between Sirius XM Canada and its predecessors and Sirius XM.

Sirius XM Canada is accounted for as an equity method investment, and its results are not consolidated in our unaudited consolidated financial statements. Sirius XM Canada does not meet the requirements for consolidation as we do not have the ability to direct the most significant activities that impact Sirius XM Canada's economic performance.

We had the following related party balances associated with Sirius XM Canada:

June 30, 2018

December 31, 2017

Related party current assets

$

13,692

$

10,284

Related party long-term assets

$

453,416

$

481,608

Related party current liabilities

$

4,103

$

2,839

Related party long-term liabilities

$

6,269

$

7,364

As of
June 30, 2018
and
December 31, 2017
, our related party current asset balance included amounts due under the Services Agreement and Advisory Services Agreement and certain amounts related to transactions outside the scope of the new services arrangements. Our related party long-term assets balance as of
June 30, 2018
and
December 31, 2017
included the

carrying value of our investment balance in Sirius XM Canada of
$323,226
and
$341,214
, respectively, and, as of
June 30, 2018
and
December 31, 2017
, also included
$130,190
and
$140,073
, respectively, for the long-term value of the outstanding loan to Sirius XM Canada. Our related party liabilities as of each of
June 30, 2018
and
December 31, 2017
included
$2,776
for the current portion of deferred revenue and
$3,700
and
$5,088
, respectively, for the long-term portion of deferred revenue recorded as of the Merger date related to agreements with legacy XM Canada, now Sirius XM Canada. These costs are being amortized on a straight line basis through 2020.

Sirius XM Canada paid gross dividends to us of
$408
during the
three months
ended
June 30, 2018
and
$1,439
and
$3,796
during the
six months
ended
June 30, 2018
and
2017
, respectively. Sirius XM Canada did
no
t pay any dividends to us during the
three months
ended
June 30, 2017
. Dividends are first recorded as a reduction to our investment balance in Sirius XM Canada to the extent a balance exists and then as Other income for any remaining portion.

We recorded the following revenue and other income associated with Sirius XM Canada in our unaudited consolidated statements of comprehensive income:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2018

2017

2018

2017

Revenue
(a)(b)

$

23,273

$

28,129

$

47,370

$

40,345

Other income

Share of net earnings
(b)

$

(896

)

$

(5,197

)

$

85

$

(2,183

)

Interest income
(c)

$

2,557

$

803

$

5,204

$

803

(a)

Prior to the Transaction, under our former agreements with Sirius XM Canada, we received a percentage-based fee of
10%
and
15%
for certain types of subscription revenue earned by Sirius XM Canada for the use of the Sirius and XM platforms, respectively, and additional fees for premium services and fees for activation fees and reimbursements for other charges. We record revenue from Sirius XM Canada as Other revenue in our unaudited consolidated statements of comprehensive income.

(b)

Prior to the Transaction, we recognized our proportionate share of revenue and earnings or losses attributable to Sirius XM Canada on a
one
month lag. As a result of the Transaction, there is no longer a
one
-month lag and Sirius XM Canada changed its fiscal year-end to December 31 to align with us. For the
three and six months
ended
June 30, 2018
, Share of net earnings included
$611
and
$1,234
, respectively, of amortization related to equity method intangible assets.

(c)

This interest income relates to the loan to Sirius XM Canada and is recorded as Other income in our unaudited consolidated statements of comprehensive income.

Pandora

On September 22, 2017, Sirius XM completed a
$480,000
investment in Pandora. Pursuant to an Investment Agreement with Pandora, Sirius XM purchased
480
shares of Pandora’s Series A Convertible Preferred Stock, par value
$0.0001
per share (the “Series A Preferred Stock”), for an aggregate purchase price of
$480,000
. As of
June 30, 2018
, the Series A Preferred Stock, including accrued but unpaid dividends, represents a stake of approximately
18%
of Pandora's common stock outstanding and approximately a
15%
interest on an as-converted basis. Pandora operates an internet-based music discovery platform, offering a personalized experience for listeners.

The Series A Preferred Stock is convertible at the option of the holders at any time into shares of common stock of Pandora (“Pandora Common Stock”) at an initial conversion price of
$10.50
per share of Pandora Common Stock and an initial conversion rate of
95.2381
shares of Pandora Common Stock per share of Series A Preferred Stock, subject to certain customary anti-dilution adjustments. Holders of the Series A Preferred Stock are entitled to a cumulative dividend at the rate of
6.0%
per annum, payable quarterly in arrears, if and when declared. Pandora has the option to pay dividends in cash when authorized by their Board and declared by Pandora or accumulate dividends in lieu of paying cash. Any conversion of Series A Preferred Stock may be settled by Pandora, at its option, in shares of Pandora Common Stock, cash or any combination thereof. However, unless and until Pandora’s stockholders have approved the issuance of greater than
19.99%
of the outstanding Pandora Common Stock, the Series A Preferred Stock may not be converted into more than
19.99%
of Pandora’s outstanding Pandora Common Stock as of June 9, 2017. The liquidation preference of the Series A Preferred Stock, including accrued dividends of
$25,684
, was
$505,684
as of
June 30, 2018
.

The investment includes a mandatory redemption feature on any date from and after September 22, 2022 whereby Sirius XM, at its option, may require Pandora to purchase the Series A Preferred Stock at a price equal to
100%
of the liquidation

preference plus accrued but unpaid dividends for, at the election of Pandora, cash, shares of Pandora Common Stock or a combination thereof, and as such the investment qualifies as a debt security under ASC 320,
Investments-Debt and Equity Securities
. As the investment includes a conversion option, we have elected to account for this investment under the fair value option to reduce the accounting asymmetry that would otherwise arise when recognizing the changes in the fair value of available-for-sale investments. Under the fair value option, any gains (losses) associated with the change in fair value will be recognized in Other income within our unaudited consolidated statements of comprehensive income. An
$86,074
and
$117,449
unrealized gain associated with this investment was recognized during the
three and six months
ended
June 30, 2018
, respectively, as Other income in our unaudited consolidated statements of comprehensive income. The fair value of our investment, including accrued dividends, as of
June 30, 2018
and
December 31, 2017
was
$597,921
and
$480,472
, respectively, and is recorded as a related party long-term asset within our unaudited consolidated balance sheets. This investment does not meet the requirements for the equity method of accounting as it does not qualify as in-substance common stock.

Sirius XM has appointed James E. Meyer, our Chief Executive Officer, David J. Frear, our Senior Executive Vice President and Chief Financial Officer, and Gregory B. Maffei, the Chairman of our Board of Directors, to Pandora's Board of Directors pursuant to our designation rights under the Investment Agreement. Mr. Maffei also serves as the Chairman of Pandora's Board of Directors.

Sirius XM's right to designate directors will fall away once Sirius XM and its affiliates fail to beneficially own shares of Series A Preferred Stock and/or Pandora Common Stock issued upon conversion thereof equal to (on an as-converted basis) at least
50%
of the number of shares of Pandora Common Stock issuable upon conversion of the Series A Preferred Stock purchased under the Investment Agreement. Following the earlier to occur of (i) September 22, 2019 and (ii) the date on which Sirius XM and its affiliates fail to beneficially own shares of Series A Preferred Stock and/or Pandora Common Stock that were issued upon conversion thereof equal to (on an as-converted basis) at least
75%
of the number of shares of Pandora Common Stock issuable upon conversion of the Series A Preferred Stock purchased under the Investment Agreement, Sirius XM has the right to designate only
two
directors.

We are subject to certain standstill restrictions, including, among other things, that we are restricted from acquiring additional securities of Pandora until December 9, 2018.

Except as to matters that may be voted upon separately by holders of the Series A Preferred Stock, Sirius XM is entitled to vote as a single class with the holders of Pandora Common Stock on an as-converted basis (up to a maximum of 19.99% of the Pandora Common Stock outstanding on June 9, 2017, unless stockholder approval has been received). Sirius XM is also entitled to a separate class vote with respect to certain amendments to Pandora’s organizational documents, issuances by Pandora of securities that are senior to, or equal in priority with, the Series A Preferred Stock and the incurrence of certain indebtedness by Pandora.

Upon certain change of control events involving Pandora, Pandora is required to repurchase all of the Series A Preferred Stock at a price equal to the greater of (1) an amount in cash equal to
100%
of the liquidation preference thereof plus all accrued but unpaid dividends through June 9, 2022 (assuming such shares of Series A Preferred Stock remain outstanding through such date) and (2) the consideration the holders would have received if they had converted their shares of Series A Preferred Stock into Pandora Common Stock immediately prior to the change of control event (disregarding the 19.99% cap).

Beginning on September 22, 2020, if the volume weighted average price per share of Pandora Common Stock exceeds
$18.375
, as may be adjusted, for at least
20
trading days in any period of
30
consecutive trading days, Pandora may redeem all of the outstanding Series A Preferred Stock at a price equal to
100%
of the liquidation preference thereof plus all accrued but unpaid dividends for, at the election of Pandora, cash, shares of Pandora Common Stock or a combination thereof, provided that, unless stockholder approval has been received, Pandora may not settle the redemption for shares of Pandora Common Stock to the extent the
19.99%
cap would be exceeded.

Pursuant to a registration rights agreement entered into with Pandora, Sirius XM has certain customary registration rights with respect to the Series A Preferred Stock and Pandora Common Stock issued upon conversion thereof.

Our debt as of
June 30, 2018
and
December 31, 2017
consisted of the following:

Carrying value
(a)
at

Issuer / Borrower

Issued

Debt

Maturity Date

Interest Payable

Principal Amount at June 30, 2018

June 30, 2018

December 31, 2017

Sirius XM
(b)

July 2017

3.875% Senior Notes

August 1, 2022

semi-annually on February 1 and August 1

$

1,000,000

$

992,811

$

992,011

Sirius XM
(b)

May 2013

4.625% Senior Notes

May 15, 2023

semi-annually on May 15 and November 15

500,000

496,923

496,646

Sirius XM
(b)

May 2014

6.00% Senior Notes

July 15, 2024

semi-annually on January 15 and July 15

1,500,000

1,488,758

1,488,002

Sirius XM
(b)

March 2015

5.375% Senior Notes

April 15, 2025

semi-annually on April 15 and October 15

1,000,000

991,777

991,285

Sirius XM
(b)

May 2016

5.375% Senior Notes

July 15, 2026

semi-annually on January 15 and July 15

1,000,000

990,597

990,138

Sirius XM
(b)

July 2017

5.00% Senior Notes

August 1, 2027

semi-annually on February 1 and August 1

1,500,000

1,486,728

1,486,162

Sirius XM
(c)

December 2012

Senior Secured Revolving Credit Facility (the "Credit Facility")

June 29, 2023

variable fee paid quarterly

1,750,000

—

300,000

Sirius XM

Various

Capital leases

Various

n/a

n/a

8,324

10,597

Total Debt

6,455,918

6,754,841

Less: total current maturities

4,660

5,105

Less: total deferred financing costs for Notes

7,969

8,493

Total long-term debt

$

6,443,289

$

6,741,243

(a)

The carrying value of the obligations is net of any remaining unamortized original issue discount.

(b)

Substantially all of our domestic wholly-owned subsidiaries have guaranteed these notes.

(c)

In June 2018, Sirius XM entered into an amendment to extend the maturity of the Credit Facility to June 2023. Sirius XM's obligations under the Credit Facility are guaranteed by certain of its material domestic subsidiaries and are secured by a lien on substantially all of Sirius XM's assets and the assets of its material domestic subsidiaries. Interest on borrowings is payable on a monthly basis and accrues at a rate based on LIBOR plus an applicable rate. Sirius XM is also required to pay a variable fee on the average daily unused portion of the Credit Facility which is payable on a quarterly basis. The variable rate for the unused portion of the Credit Facility was
0.25%
per annum as of
June 30, 2018
. All of Sirius XM's outstanding borrowings under the Credit Facility are classified as Long-term debt within our unaudited consolidated balance sheets due to the long-term maturity of this debt.

Covenants and Restrictions

Under the Credit Facility, Sirius XM, our wholly-owned subsidiary, must comply with a debt maintenance covenant that it cannot exceed a total leverage ratio, calculated as consolidated total debt to consolidated operating cash flow, of
5.0
to 1.0. The Credit Facility generally requires compliance with certain covenants that restrict Sirius XM's ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with another person, (vi) sell, assign, lease or otherwise dispose of all or substantially all of Sirius XM's assets, and (vii) make voluntary prepayments of certain debt, in each case subject to exceptions.

The indentures governing Sirius XM's notes restrict Sirius XM's non-guarantor subsidiaries' ability to create, assume, incur or guarantee additional indebtedness without such non-guarantor subsidiary guaranteeing each such series of notes on a pari passu basis. The indentures governing the notes also contain covenants that, among other things, limit Sirius XM's ability and the ability of its subsidiaries to create certain liens; enter into sale/leaseback transactions; and merge or consolidate.

Under Sirius XM's debt agreements, the following generally constitute an event of default: (i) a default in the payment of interest; (ii) a default in the payment of principal; (iii) failure to comply with covenants; (iv) failure to pay other indebtedness

after final maturity or acceleration of other indebtedness exceeding a specified amount; (v) certain events of bankruptcy; (vi) a judgment for payment of money exceeding a specified aggregate amount; and (vii) voidance of subsidiary guarantees, subject to grace periods where applicable. If an event of default occurs and is continuing, our debt could become immediately due and payable.

At
June 30, 2018
and
December 31, 2017
, we were in compliance with our debt covenants.

(12)

Stockholders’ Equity

Common Stock, par value
$0.001
per share

We are authorized to issue up to
9,000,000
shares of common stock. There were
4,485,774
and
4,530,928
shares of common stock issued and
4,485,774
and
4,527,742
shares outstanding on
June 30, 2018
and
December 31, 2017
, respectively.

As of
June 30, 2018
, there were
281,863
shares of common stock reserved for issuance in connection with outstanding stock based awards to be granted to members of our board of directors, employees and third parties.

Quarterly Dividends

During the
six months
ended
June 30, 2018
, our board of directors declared the following dividends:

Declaration Date

Dividend Per Share

Record Date

Total Amount

Payment Date

January 23, 2018

$

0.011

February 7, 2018

$

49,397

February 28, 2018

April 26, 2018

$

0.011

May 10, 2018

$

49,287

May 31, 2018

Stock Repurchase Program

As of
June 30, 2018
, our board of directors had approved for repurchase an aggregate of
$12,000,000
of our common stock. Our board of directors did not establish an end date for this stock repurchase program. Shares of common stock may be purchased from time to time on the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act, in privately negotiated transactions, including transactions with Liberty Media and its affiliates, or otherwise. As of
June 30, 2018
, our cumulative repurchases since December 2012 under our stock repurchase program totaled
2,529,978
shares for
$9,694,181
, and
$2,305,819
remained available under our stock repurchase program.

The following table summarizes our total share repurchase activity for the
six months
ended:

June 30, 2018

June 30, 2017

Share Repurchase Type

Shares

Amount

Shares

Amount

Open Market

55,843

$

317,061

155,711

$

775,701

Preferred Stock, par value
$0.001
per share

We are authorized to issue up to
50,000
shares of undesignated preferred stock with a liquidation preference of
$0.001
per share. There were no shares of preferred stock issued or outstanding as of
June 30, 2018
and
2017
.

(13)

Benefit Plans

We recognized share-based payment expense of
$36,215
and
$30,251
for the
three months
ended
June 30, 2018
and
$70,448
and
$59,697
for the
six months
ended
June 30, 2018
and
2017
, respectively.

2015 Long-Term Stock Incentive Plan

In May 2015, our stockholders approved the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan (the “2015 Plan”). Employees, consultants and members of our board of directors are eligible to receive awards under the 2015 Plan. The 2015 Plan provides for the grant of stock options, restricted stock awards, restricted stock units and other stock-based awards that the compensation committee of our board of directors deems appropriate. Stock-based awards granted under the 2015 Plan

are generally subject to a graded vesting requirement, which is generally
three
to
four years
from the grant date. Stock options generally expire
ten years
from the date of grant. Restricted stock units include performance-based restricted stock units (“PRSUs”), the vesting of which are subject to the achievement of performance goals and the employee's continued employment and generally cliff vest on the
third
anniversary of the grant date. Each restricted stock unit entitles the holder to receive
one
share of common stock upon vesting. As of
June 30, 2018
,
171,619
shares of common stock were available for future grants under the 2015 Plan.

Other Plans

We maintain
three
other share-based benefit plans — the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan, the XM 2007 Stock Incentive Plan and the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan. Excluding dividend equivalent units granted as a result of a declared dividend, no further awards may be made under these plans.

The following table summarizes the weighted-average assumptions used to compute the fair value of options granted to employees and members of our board of directors:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2018

2017

2018

2017

Risk-free interest rate

2.6%

1.6%

2.5%

1.6%

Expected life of options — years

3.48

4.35

3.54

4.07

Expected stock price volatility

22%

26%

22%

26%

Expected dividend yield

0.6%

0.8%

0.7%

0.8%

There were
no
options granted to third parties during the
three and six months
ended
June 30, 2018
and
2017
.

The following table summarizes stock option activity under our share-based plans for the
six months
ended
June 30, 2018
:

Options

Weighted-
Average
Exercise
Price Per Share

Weighted-
Average
Remaining
Contractual
Term (Years)

Aggregate
Intrinsic
Value

Outstanding as of December 31, 2017

280,457

$

3.76

Granted

10,617

$

6.44

Exercised

(41,644

)

$

3.18

Forfeited, cancelled or expired

(1,926

)

$

4.48

Outstanding as of June 30, 2018

247,504

$

3.96

6.40

$

695,499

Exercisable as of June 30, 2018

115,544

$

3.40

5.30

$

389,015

The weighted average grant date fair value per share of stock options granted during the
six months
ended
June 30, 2018
was
$1.19
. The total intrinsic value of stock options exercised during the
six months
ended
June 30, 2018
and
2017
was
$139,812
and
$47,572
, respectively. During the
six months
ended
June 30, 2018
the number of net settled shares which were issued as a result of stock option exercises was
12,054
.

We recognized share-based payment expense associated with stock options of
$20,776
and
$20,125
for the
three months
ended
June 30, 2018
and
2017
, respectively, and
$40,435
and
$39,637
for the
six months
ended
June 30, 2018
and
2017
, respectively.

The following table summarizes the restricted stock unit, including PRSU, activity under our share-based plans for the
six months
ended
June 30, 2018
:

Shares

Grant Date
Fair Value
Per Share

Nonvested as of December 31, 2017

31,323

$

4.54

Granted

7,123

$

6.27

Vested

(3,518

)

$

3.92

Forfeited

(569

)

$

4.80

Nonvested as of June 30, 2018

34,359

$

4.93

The total intrinsic value of restricted stock units, including PRSUs, vesting during the
six months
ended
June 30, 2018
and
2017
was
$22,656
and
$4,802
, respectively. During the
six months
ended
June 30, 2018
, the number of net settled shares which were issued as a result of restricted stock units vesting totaled
1,821
. During the
six months
ended
June 30, 2018
, we granted
3,768
PRSUs to certain employees. We believe it is probable that the performance target applicable to these PRSUs will be achieved.

In connection with the cash dividends paid during the
six months
ended
June 30, 2018
, we granted
126
restricted stock units, including PRSUs, in accordance with the terms of existing award agreements. These grants did not result in any additional incremental share-based payment expense being recognized during the
six months
ended
June 30, 2018
.

We recognized share-based payment expense associated with restricted stock units, including PRSUs, of
$15,439
and
$10,126
for the
three months
ended
June 30, 2018
and
2017
, respectively, and
$30,013
and
$20,060
for the
six months
ended
June 30, 2018
and
2017
, respectively.

Total unrecognized compensation costs related to unvested share-based payment awards for stock options and restricted stock units, including PRSUs, granted to employees, members of our board of directors and third parties at
June 30, 2018
and
December 31, 2017
was
$251,588
and
$241,521
, respectively. The total unrecognized compensation costs at
June 30, 2018
are expected to be recognized over a weighted-average period of
1.72
years.

401(k) Savings Plan

Sirius XM sponsors the Sirius XM Radio Inc. 401(k) Savings Plan (the “Sirius XM Plan”) for eligible employees. The Sirius XM Plan allows eligible employees to voluntarily contribute from
1%
to
50%
of their pre-tax eligible earnings, subject to certain defined limits. We match
50%
of an employee’s voluntary contributions per pay period on the first
6%
of an employee’s pre-tax salary up to a maximum of
3%
of eligible compensation. We may also make additional discretionary matching, true-up matching and non-elective contributions to the Sirius XM Plan. Employer matching contributions under the Sirius XM Plan vest at a rate of
33.33%
for each year of employment and are fully vested after
three years
of employment for all current and future contributions. Our cash employer matching contributions are not used to purchase shares of our common stock on the open market, unless the employee elects our common stock as their investment option for this contribution. We recognized
$2,159
and
$1,835
in expense during
three months
ended
June 30, 2018
and
2017
, respectively, and
$4,028
and
$3,517
in expense during the
six months
ended
June 30, 2018
and
2017
, respectively, in connection with the Sirius XM Plan.

Sirius XM Holdings Inc. Deferred Compensation Plan

In 2015, we adopted the Sirius XM Holdings Inc. Deferred Compensation Plan (the “DCP”). The DCP allows members of our board of directors and certain eligible employees to defer all or a portion of their base salary, cash incentive compensation and/or board of directors’ cash compensation, as applicable. Pursuant to the terms of the DCP, we may elect to make additional contributions beyond amounts deferred by participants, but we are under no obligation to do so. We have established a grantor (or “rabbi”) trust to facilitate the payment of our obligations under the DCP.

Contributions to the DCP, net of withdrawals, for the
three months
ended
June 30, 2018
and
2017
were
$307
and
$334
, respectively, and for the
six months
ended
June 30, 2018
and
2017
were
$7,138
and
$7,355
, respectively. As of
June 30, 2018
and
December 31, 2017
, the fair value of the investments held in the trust were
$22,375
and
$14,641
, respectively, which is

included in Other long-term assets in our unaudited consolidated balance sheets and are classified as trading securities. Trading gains and losses associated with these investments are recorded in Other income within our unaudited consolidated statements of comprehensive income. The associated liability is recorded within Other long-term liabilities in our unaudited consolidated balance sheets, and any increase or decrease in the liability is recorded in General and administration expense within our unaudited consolidated statements of comprehensive income. For the
three and six months
ended
June 30, 2018
and
2017
, we recorded an immaterial amount of unrealized gains on investments held in the trust.

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Commitments and Contingencies

The following table summarizes our expected contractual cash commitments as of
June 30, 2018
: